Things about Crypto the Banks don't want you to know. by Caroline Sherman

2 years ago

Am I the only one who felt like throwing up when news came out that JPMorgan reported record revenue for the first quarter of this year? The bank’s profits increased 53% from the same quarter last year. Meanwhile, we the consumers are paying higher interest rates for cars, home loans, and everything else. Supposedly there was a banking crisis. Of course, the crisis only affected the smaller banks and once the nuisances were eliminated, the government came in to bail everybody out.

Now that the crisis has been averted and banks get another concession and longer leash to take unnecessary risks, we can all get back to normal life. The only problem is: how many more “get of jail free” cards to the banks have left? Every crisis lowers banks’ credibility and soon it will get to a point where even the most ignorant will have to take notice.

Luckily, a decentralized alternative exists. Bitcoin was created in response to the outsized risk of our current banking system. And each year, its adoption is increasing. Here are some things that the guys in suits with white shirts don’t want you to know about Bitcoin.

#1 Bitcoin and crypto are a threat to the banks

If people can take custody of their wealth, banks will have less value and earn lower profits. This will negatively impact bank executives and large shareholders. Why? Deposits in banks would be reduced. The banks take your deposits, pay you a low-interest rate, and then earn a “spread” from the higher interest rate they collect. Sounds like a good deal, doesn’t it?

#2 When you deposit your money into a bank, you are loaning them your money.

Have you ever noticed that your checking account earns a 0.01% interest rate? This is because you are technically loaning your money to a bank when you deposit the funds. They are required to pay interest on the loan and it’s the lowest interest rate they can pay.

Once the funds are deposited, it’s the banks’ money and you get access to it if/when they feel comfortable giving you access. We accept limits on how much we can withdraw from ATMs, banking hours, and potential freezes on our accounts when we do business with a bank. Banks have refused large cash withdrawals. Don’t get mad. Read the fine print. It’s their money, not yours.

With Bitcoin, you get access to your wealth 24 hours per day, 7 days per week. There are no “Bitcoin holidays” like banks have. You aren’t lending your wealth to a centralized institution that can freeze your funds or make you jump through hoops to access your (loaned) money.

#3 H.R. 1473

There’s a law on the books referred to as the Dodd-Frank Bail-in. This law states that a U.S. bank may take its depositors’ funds (i.e. your checking, savings, CDs, IRA & 401(k) accounts) and use those funds when necessary to keep itself, the bank, afloat. Don’t worry. If your bank needs a bail-in, you will receive equity in this bank that is on the brink of failure. Unfortunately, it will most likely be after the record profits have been divvied out.

Bailouts and bail-ins don’t exist in Bitcoin. This is why the price repeatedly corrects by 80% and it still survives. The alternative is having a saving device (fiat) where debasement, inflation, and backing with debt are the norms. Don’t believe it can happen? It already did in Cypress in 2013.

#4 The FDIC is underfunded

Backed by the US government’s unlimited coffers, banks want you to feel your deposits are secure when you loan (I mean deposit) your money to them. The FDIC insures normal checking and savings accounts up to $250,000 ($500,000 for couples). This gives depositors a feeling of security that their wealth won’t suddenly disappear if the bank goes belly up.

Unfortunately, the FDIC balance sheet and US treasury credit line only equate to $224.5 billion. The only problem is that massive institutions like JPMorgan have $2.38 trillion in assets. Even the recently failed and bailed Silicon Valley bank had $209 billion in assets. If a massive banking crisis occurs, the government will have to print a lot more money to insure depositors. We are seeing the result of massive money printing right now- it’s called inflation.

Bitcoin doesn’t have any insurance. While this may be considered bad, it eliminates a false sense of security. Bitcoin’s limited supply means that it can’t be created out of thin air like fiat currency. Ironically, many people think Bitcoin is made-up money but fiat isn’t. Kind of makes you wonder, eh?

#5 They want in on Bitcoin in a big way

Banks are designed to make profits. How else will the executives make their massive incomes? And they deserve it, right? Just ask the Silicon Valley Bank shareholders who learned the CEO, Gregory Becker sold $3.5 million in company stock two weeks before the bank’s collapse. This is nothing new. You can go back to 2008 and check Countrywide CEO Angelo Mozilo’s dumping of Countrywide stock before its value evaporated.

And if they can find profits in Bitcoin, they will try getting in on it. How? Imagine the fees they can charge to custody, sell, or advise on Bitcoin and crypto assets. Worse, imagine if they are buying up the supply right now so they can control more of this precious asset.

Banks have a terrible record of manipulating markets and putting earnings above everything else. If they can start earning a piece of this brand-new investment vehicle with limited adoption and a real reason to own, they can continue existing and thriving by doing even less work.

If regulators give Americans the green light to own Bitcoin, expect to hear the narrative on Bitcoin doing a 180 by banks. They will go from saying that Bitcoin is, “risky, used for crime, and not secure” to, “every portfolio should have a couple of percent for diversification, crime was really in its earlier days, and we will securely custody it for you.”

Key Takeaways

The most recent banking crisis cemented the extravagant lengths banks can go to. Accountability doesn’t exist since the government relies o

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